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Spring 2006
Prepared by the North Carolina Department of Insurance
Flood Coverage: A New Approach for
Agents, Better Service for Clients
Insurance Commissioner Jim Long
asks: do you fully understand the
importance of flood insurance?
Whether you are an agent or adjuster,
insurance executive or just a homeowner
yourself, flood insurance should be on your
mind. Every North Carolinian should con-sider
whether he or she needs the coverage;
but insurance agents should take on an ad-ditional
burden — learning enough about
the coverage to properly advise clients.
Commissioner Long
is urging agents across
the state to consider
flood insurance in a
different light.
“As yet another hur-ricane
season gets underway, with last year’s
extensive flooding in spots around the na-tion
still fresh on our minds, I want to take
this opportunity to suggest a slightly differ-ent
approach to flood insurance — treat it
as a valuable product in the portfolio you
offer your clients,” he says. “Many prod-ucts
available today are of interest to only
a small portion of consumers, but often
agencies advertise them as products that are
available for purchase; I encourage you to
make flood insurance one of the products
that you talk with your clients about.”
An NAIC flood insurance study group
contends that one of the largest problems
with flood coverage is just plain igno-rance
on the part of agents, adjusters and
insureds alike. Since flooding can be a
problem in North Carolina, it is important
for agents and adjusters to be familiar with
flood coverage.
“You wouldn’t sell auto, home or business
insurance without being familiar with the
product so that you can offer your client
informed advice and the same should hold
true for flood insurance. If you’re not famil-iar
with it, take the steps necessary to learn
about it,” Long says. “A good starting point
for learning about
flood insurance is
continuing educa-tion;
we’ve included
a flood course in the
continuing educa-tion
program since
1999, so if you haven’t taken it yet, take
it this year, and if you took it several years
ago, take it again, as the program is always
changing.”
The Department’s Web site,
www.ncdoi.com, contains a section that
can help consumers understand specific
types of insurance, including flood insur-ance.
By selecting “flood insurance,” con-sumers
can read about the most frequently
asked questions, including what a flood
policy covers, what it doesn’t cover, and any
restrictions that might apply. This consum-er
section provides a good primer on flood
coverage, and there is also a link to the
Continued on page 2...
Flood insurance is a
valuable product in your
portfolio.
p 3
Fighting Insurance Fraud
pp 4 - 5
Staff Changes at NCDOI
p 6
Agent Advertising Rules
New Record Lookup System
p 7
Securities, Investment Fraud
p 8
New Phone # in Agent Services
p 9
Hiring a Felon? Things to Know
p 10
Regulatory Actions for 2005
p 11
History of Market Examinations
Back
Consumer Services Stats
Eye on DOI
Agent Services Division generates several
thousands of letters each year to our
agents, brokers, adjusters, bail bondsmen
and business entities. Unfortunately,
many of these communications are
never seen by our licensees because the
addresses we have on file are out of date.
It is important for all licensees to
remember that only the licensee can
update his or her address with the
Department. In accordance with
N.C.G.S. §58-2-69(b), “Every licensee
shall give written notification to the
Commissioner of any change of the
licensee’s residential address within 10
business days after the licensee moves
into the licensee’s new residence. This
requirement applies if the change of
residential address is by governmental
action and there has been no actual
change of residence location; in which
case the licensee must notify the
Commissioner within 10 days after the
effective date of the change.”
We know that our licensees do not want
to miss important information about
their license status such as continuing
education notices, renewal billings and
other updates, but the Department
cannot change a licensee’s address
from the U.S. Postal Service forward
information since we can only make the
change at the licensee’s request.
If your mailing address is a post office
box, we must have both a mailing
and physical address on record. You
can find a change of address form
on the Department’s Web site at
www.ncdoi.com.
North Carolina
Department of Insurance
1201 Mail Service Center, Raleigh, NC 27699
www.ncdoi.com
Agent Services (919) 807-6800
Consumer Services (800) 546-5664
Commissioner
Jim Long
Chief Deputy Commissioner
Barbara Morales Burke
Assistant Commissioner
Wayne Goodwin
Senior Deputy Commissioners
Louis Belo
Tim Bradley
Angela Ford
Ray Martinez
Deputy Commissioners
Kevin Conley, Actuarial Services
Etta Maynard, Agent Services
Bob Lisson, Consumer Services
Wanda Edwards, Engineering and Codes
Tony Riddick, Financial Evaluation
Richard Kinn, Investigations
Ted Hamby, Life and Health
Hazel Stephenson, Manufactured Building
Ernest Nickerson, Market Examinations
Fred Fuller, Property and Casualty
Jeff Trendel, Regulatory Actions
Carla Obiol, SHIIP
William Bradbury, Eastern Regional Office
Charles “Skeeter” Curtis, Western Regional Office
Editor— Chrissy Pearson
Contributing Editor — Kristin Milam
Designer — Cory Redick
Agents Reminded to Keep Department Advised of Address Changes
...continued from page 1.
National Flood Insurance Program
(NFIP) Web site, where consumers can
find a wealth of information and direc-tion
on how to handle flood coverage.
“To make sure your clients are the most
informed they can be, help yourself un-derstand
flood coverage, ” urges Long.
Some tips for becoming more familiar
with flood insurance include:
Know your community and the poten-tial
product market. Your client does
not have to live on a major river or near
the ocean to qualify for flood coverage.
Any resident of a jurisdiction participat-ing
in the NFIP is eligible to purchase
coverage. North Carolina victims of the
2004 hurricane floods were mostly in the
mountains, far from the ocean. A tropi-cal
storm can turn a peaceful mountain
creek into a raging river overnight.
Know how to write a flood policy. If
a client requested an auto policy, you
would know how to quote a premium,
which application to fill out and what
information is needed in support. Can
you do the same if a client needs or
wants flood coverage?
Establish a relationship with either the
NFIP or a Write Your Own (WYO)
program. You don’t include business
coverage in your advertisements and then
go looking for a company when you have
a client. Investigate your major carriers
for a WYO program and investigate how
to work directly with the NFIP. After you
decide how to go, set up a relationship
and make sure everyone in your office
who works with clients knows you are set
up to do this coverage.
Protect your client and yourself. Make
sure every client who might be eligible
for flood coverage is offered flood insur-ance.
Don’t be the agent who gets to
tell a client whose home or business was
destroyed by a flood that they could have
purchased coverage from you had they
only asked. Tell them they can buy it and
from you, their agent.
Include flood on a worksheet that asks
the questions about the extra coverages
that apply to home or business property
packages. Use this when selling or re-viewing
your client’s coverage, and if you
client declines the coverage, obtain their
signature on the form.
Don’t be ignorant of coverage that could
help your clients. Learn how flood insur-ance
can enhance your portfolio and bet-ter
the services you offer your customers.
Says Long, “Your client will thank you
and your community will be better off
for the effort.”
Spring 2006
The Department’s Investigations
Division saw the conclusion to
one of their largest insurance
fraud cases in years in 2005, when
they successfully shut down a major
auto insurance fraud ring in North
Carolina.
In cooperation with the North Carolina
Attorney General’s Special Prosecutions
Unit, the United States Postal Inspectors
Service and the National Insurance
Crime Bureau (NICB), and along
with special investigative units from
Nationwide, State Farm, Allstate
and GMAC insurance companies,
investigators brought to justice
eight ringleaders of the scheme,
which included an extensive
family network of fraudsters in
Siler City.
Investigators found that the fraud
ring filed at least 480 fraudulent
auto crash claims with insurance
companies since 1992. The companies
paid out an estimated $2 million in
phony claims.
Investigators were tipped off by the
insurance companies and a special agent
from NICB, who began to notice a
trend in auto accident claims from the
Chatham County, Randolph County
and Alamance County areas. Specific
interest grew as the claims began to
concentrate on the cities of Siler City
and Asheboro. City, county and state law
enforcement agencies were briefed on
the trends and joined the elaborate task
force, which Department investigators
cite as being one of the most
technologically advanced investigative
endeavors to date.
Relying heavily on a computerized link
analysis provided by the Chicago Office
of NICB, investigators were able to
show the relationships and frequencies
of each suspected family member
in the fraud ring. Combining the
computerized forensics available today
with old fashioned police work, the
task force infiltrated the family network
and obtained sufficient evidence for the
Chatham County grand jury to return
45 separate indictments on eight key
suspects.
An April 12, 2005, early morning
raid produced seven arrests. In the
months that followed, the Attorney
General’s special prosecutor presented
overwhelming evidence condemning
the seven, who then entered negotiated
guilty pleas in Chatham County
Superior Court. “I’m so proud that the
Department had a hand in bringing
these criminals to justice,” said Insurance
Commissioner Jim Long. “I hope
this can serve as a lesson to others
who are considering committing
insurance fraud.”
During his 21 year tenure,
Commissioner Long has
demonstrated a “zero tolerance”
position regarding insurance
fraud. Keeping North Carolina’s
auto insurance rates the fifth
lowest in the nation requires not only
strict and aggressive enforcement, but
also educational efforts. By working
together with federal, state and local
law enforcement agencies, Department
investigators hope to make North
Carolina a tough place to commit
insurance fraud.
Department Investigators Fight Insurance Fraud
A Closer Look at Staged Accidents in North Carolina
$
$ $ Industry statistics
estimate that 10 cents of every
dollar spent in insurance
premiums go towards paying a
fraudulent claim.
In November 2005, the U.S. Depart-ment
of Justice certified North Carolina’s
Accessibility Code as being compliant
with the Americans with Disabilities Act
(ADA) Accessibility Guidelines. As only
the sixth state in the nation to adopt an
accessibility building code that meets
federal approval, the newly certified Ac-cessibility
Code will improve access for
persons with disabilities in communities
throughout the state.
While the certification went into effect
last November, several North Carolina
Department of Insurance Office of State
Fire Marshal (OSFM) employees worked
toward ADA compliance for many
years. In fact, OSFM’s own Jeff Kanner
personally wrote and illustrated the new
Accessibility Code, which is considered
a separate volume in the state’s building
code.
“I know the hard work that went into
getting this code written and approved
by the Department of Justice will be
well worth it,” said Insurance Commis-sioner
and State Fire Marshal Jim Long.
“I’m proud that our folks played such a
major role in improving the way North
Carolina’s citizens with disabilities will
get around everyday.”
Accessibility Code Certified by U.S. Department of Justice
North Carolina Only the 6th State to Receive Federal Approval
Eye on DOI
In an effort to always serve the people
of North Carolina well, the Depart-ment
of Insurance saw a reshuffling
of staff during the past year. Some new
faces joined our work-force
and some long-time
employees moved
into management posi-tions
new for them.
Please join us in con-gratulating
and welcom-ing
the following staff.
Barbara Morales
Burke, chief dep-uty
commissioner
— Morales Burke, a
familiar face in the
Department, previously
served as assistant com-missioner,
senior dep-uty
commissioner for
Technical Services and
deputy commissioner for
Managed Care. She has
worked with private health insurance
organizations including the N.C. State
Employees’ Health Plan. Morales Burke
graduated from Fordham University
in New York with a degree in business
administration and finance, and has an
M.H.A. from the University of North
Carolina, Chapel Hill. When she’s not
working, Barbara enjoys cooking and
fine dining and, along with her with
her husband Scott, taking long walks
with their beagle, Beauregard.
Wayne Goodwin, assistant commis-sioner
— Goodwin previously served as
assistant general counsel for DOI. Prior
to coming to work with the Depart-ment,
Goodwin practiced law in Rich-mond
County and served four terms in
the N.C. House of Representatives. He
also served as adjunct professor at Rich-mond
Community College. Goodwin
is a graduate of the University of North
Carolina, Chapel Hill where he earned
degrees in political science and law. He
is married to State Representative Mela-nie
Wade Goodwin and they have one
daughter, Madison.
Ray Martinez,
senior deputy for
Company Services
— Martinez worked
with the Department
for 18 years as depu-ty
commissioner for
Financial Evaluation
prior to becoming
senior deputy. Before
he came to DOI,
Martinez worked
for Peat, Marwick,
Mitchell and Com-pany,
and served as
chief financial officer
for two insurance
companies. He is
a licensed certified
public accountant in New York and
Florida and got a degree in accounting
from Iona. Ray lives in north Raleigh
with his wife Andrea and their two dogs.
Larry Brewer, chief information sys-tems
officer — Brewer has worked
continuously with DOI since 1972, the
longest continuous tenure of anyone
currently still with the Department. For
the last 20 years, Brewer
has been with Information
Systems; prior to that he
worked in the Consumer
Services Division as well
as the Fire and Casualty
Division. He is a graduate
of North Carolina State
University with a degree
in applied mathematics.
Brewer is married with
two children and one set
of twin grandchildren.
Kevin Conley, chief actuary —
Conley worked for the Department for
barely a year prior to becoming chief
actuary; however, he has been an actuary
for more than 20 years, previously work-ing
for APCapital, the state of Iowa,
CNA and Allstate. He is a fellow of the
Casualty Actuarial Society and gradu-ate
of Valparaiso University of Indiana,
where he majored in both history and
math. Kevin and his wife, Patsy, have
seven children, ranging from 4 to 16.
Wanda Edwards, deputy commis-sioner,
Engineering Division —
Edwards was promoted to deputy com-missioner
after serving for several years
as a supervisor and code consultant
in the Engineering Division. She has
degrees in both architecture and civil
engineering with a construction option
from North Carolina State University;
Edwards also has a Professional Engineer
designation. Prior to coming to DOI,
she was self-employed as president of a
construction company and worked for
Carolina Power and Light (now Progress
Energy). She has two children, Patrick
and Adrienne Piche.
Fred Fuller, deputy commissioner,
Property and Casualty Division —
Fuller has worked in the Department
for 15 years in both the Property and
Casualty and Market Examinations
Department Congratulates Thirteen New Deputy
Commissioners, Senior Staff Members
Wayne Goodwin and Barbara
Morales Burke
Ray Martinez, Jeff Trendel and Tony Riddick
Spring 2006
Divisions. Prior to coming to work for
DOI, he worked for Crum and Forster.
Fuller has a degree in business adminis-tration
from East Carolina University.
He and his wife Krista have one son,
Jack, who is in the first grade, and one
55 lb. black poodle, Zoe.
Ted Hamby, deputy commissioner,
Life and Health Division — Over the
past 18 years, Hamby has worked in
management positions in the Managed
Care, Life and Health and Consumer
Services Divisions. Prior to coming to
DOI, Hamby worked 19 years in the in-surance
industry with experience in un-derwriting,
claims and sales administra-tion.
He has a Fellow designation from
the Life Office Management Association
and various other industry educational
designations and achievements. He and
his wife Roberta have a son who is a cer-tified
public accountant and a daughter
with two grandchildren.
Bob Lisson, deputy commissioner,
Consumer Services Division — Lis-son
was assistant deputy commissioner
of the Managed Care Division for five
and a half years, prior to moving into
the Consumer Division. Before joining
the Department, he was employed in the
managed care sector with the Morrisville
regional office of Magellan Behavioral
Health. Lisson has an undergraduate de-gree
in economics and psychology from
Duke, and a masters and Ph.D. from the
University of North Carolina, Greens-boro.
He lives in Raleigh with his wife
Lisa, who is a physical therapist at Duke
Health Raleigh
Hospital, and their
two children ages
11 and 7.
Etta Maynard,
deputy commis-sioner,
Agent
Services Division
— Maynard has
been involved
in the insurance
arena for 19 years,
with experience in
both operations and underwriting in
the personal lines market. Her regula-tory
experience began in 2000 when she
came to DOI as the agency examination
supervisor. Maynard has a degree from
the University of North Carolina at
Pembroke and is a member of the Insur-ance
Regulatory Examiners Society.
She lives with her husband,
Tom, and their dog,
Abigail. Her interests
include going to the
beach, reading, and
hosting social events
with her husband.
Tony Riddick, deputy
commissioner, Finan-cial
Evaluation Divi-sion
— Riddick worked
with the Department in
the Financial Evaluation
Division as an examiner
and examination super-visor
for more than 11
years prior to becom-ing
head of the
Division. He is a certified public
accountant and certified finan-cial
examiner. Prior to working
with the Department, he worked
for Reliance Insurance Company
and Great American Insurance
Company. Riddick is a gradu-ate
of North Carolina Central
University with a degree in ac-counting.
He is on the board of
directors for the North Carolina
Association of Certified Public
Accountants and the Society of Financial
Examiners. He and his wife, Sharon,
have been married for 15 years, and he
is an active volunteer with the youth
mentoring organi-zation,
100 Black
Men of America.
Hazel Stephen-son,
deputy
commissioner,
Manufactured
Building Division
— Stephenson has
worked with the
Department for
more 20 years, all
of that time with
the Manufactured
Building Division.
Her duties in that division included serv-ing
as a hearing officer and supervisor.
Prior to DOI, she worked with the De-partment
of Transportation. Stephenson
is married and has
two daughters, but
she is most proud
of being a doting
grandmother to
her six grandchil-dren,
five boys and
one girl.
Jeff Trendel,
deputy commis-sioner,
Regula-tory
Actions
Division —
Trendel worked for
the Department
for eight years
prior to his promo-tion
to the Regulatory Actions Division,
with most of that time spent as manager
of the special entities section in the Fi-nancial
Evaluation Division. Prior to
working with the Department, Trendel
worked for Raleigh Federal Savings
Bank. He is a 1988 graduate of the
Citadel, the Military College of South
Carolina, with a major in business ad-ministration.
Trendel is married with five
sons ranging in age from 2 to 17, and is
actively involved in coaching both bas-ketball
and baseball.
Bob Lisson
Fred Fuller, Etta Maynard and Ted Hamby
Wanda Edwards and Hazel Stephenson
Eye on DOI
DOI discovered that some agents
are not following North Carolina’s
laws regarding advertising insur-ance
products. Because these laws are
aimed at protecting consumers’ interests,
please review these laws so that you can
protect not only your clients and your-self,
but also the insurance companies for
which you work.
Independently developed advertise-ments
are a tricky issue because approval
requirements differ depending on the
advertised subject matter. First, agents
should be aware that any advertising
piece that is presented as an inducement
to purchase insurance, whether in print,
on television, on radio or in any other
form, is the responsibility of the in-surer.
This is the case regardless of who
wrote, created, designed or presented
the advertisement. In fact, many insurers
maintain strict control over the content
of advertising to avoid possible deceptive
practices which may hold them liable,
and many agents have signed contracts
with appointed companies which require
advertising approval by the company
prior to use.
North Carolina’s insurance laws explic-itly
require insurers to obtain approval
from the DOI’s Life and Health Divi-sion
prior to actually using certain adver-tising
materials. These laws specifically
pertain to long-term care, annuities,
Medicare supplement and interest sensi-tive
life products. An important detail
to note is that the Life and Health Divi-sion
accepts and reviews these materials
only when submitted by the insurer
— they do not accept, review or approve
advertising materials submitted directly
by agents.
In addition, regulations stipulate all ad-vertising
(including that which is not re-quired
to be filed with the Department)
must be sufficiently complete and clear
to avoid deception or the capacity or
tendency to mislead. These requirements
are so strict that, for example, there are
certain words that cannot be used in life
and annuity advertising.
There have been some problems with
some agents developing and using ad-vertising
materials that require prior
approval, but that were not receiving
any approval at all because it was not
understood that the materials met the
definitions of “advertisements” found
in the North Carolina Administrative
Code. Specifically, the two areas of con-cern
are materials used in sales seminars
conducted by agents and sales presenta-tion
spreadsheets, which consolidate the
policy terms and conditions of different
insurers for side-by-side comparison.
To clear up this confusion, the North
Carolina Administrative Code 11
NCAC 12.0517 defines accident and
health advertisements to include the fol-lowing:
• printed and published material, au-dio
visual material and descriptive
literature of an insurer used in direct
mail, newspapers, magazines, radio
scripts, TV scripts, billboards and
similar displays;
• descriptive literature and sales aids
of ALL kinds issued by an insurer,
agent or broker for presentation to
members of the insurance buying
public, including but not limited to
circulars, leaflets, booklets, depic-tions,
illustrations and form letters;
• prepared sales talks, presentations
and material for use by agents,
brokers and solicitors.
Further, North Carolina Administrative
Code 11 NCAC 12.0424 defines life
insurance and annuity advertising to
include all of the above definitions found
in accident and health advertisements
and also adds:
• material designed to create public
interest in life insurance or annuities
or in an insurer, or to induce the
public to purchase, increase, modify,
reinstate, borrow on, surrender, re-place
or retain a policy;
• material used for recruitment, train-ing,
and education of an insurer’s
sales personnel, agents, solicitors,
and brokers which is designed to be
used or is used to induce the public
to purchase, increase, modify, rein-state,
borrow on, surrender, replace
or retain a policy.
The Agent Services Division has ruled
that generic business cards identifying
licensees’ qualifications do not require
prior approval by the Department;
however, if questions remain regarding
logos or content of the business card,
agents should consult with their
appointed company. Remember, too,
that all agents should submit advertising
materials to their appointed company
for approval PRIOR to use and consult
with them directly on any questions
they may have in developing material to
ensure it is in compliance with company
and DOI requirements.
Agent Advertising: What You Don’t Know Can Hurt You
Agents, need to look up your records?
Our new Record Look-Up Service is now available online!
The following information can now be obtained via www.ncdoi.com:
• license status (individual licensees and business entities)
• verification of annual renewal payments
• CE status, including listing of courses completed by year
• CE course offering and provider information by license type
Please note that the CE and licensing Voice Response Units (VRU) have been
disabled and will no longer be updated.

Spring 2006
Insurance Commissioner Jim Long
and Secretary of State Elaine
Marshall are working together to
ensure that insurance agents are
educated on North Carolina’s securities
laws and how they may affect an agent’s
business. Securities laws may apply to
types of products offered to sell.
The Secretary of State’s office has seen
an increase in fraudulent, unregistered
securities offerings and is warning
agents that the sale of these investment
opportunities may result in violations
of the North Carolina Securities Act.
As an agent, it is important that you
understand that most non-insurance
investment offerings
are considered “securities” under
both state and federal law.
Licensed insurance profession-als
are receiving solicitations
asking for their participation in
the offer and sale of various investments
and/or business opportunities to clients;
often, these solicitations promise above-average
commissions to lure you into
selling these products. These solicitations
target you because, as an agent, you have
an extensive client list and a good busi-ness
reputation in your community, so
that you can reel in unsuspecting inves-tors.
Naturally, these scam artists claim
that these investment products are not
“securities” and aren’t regulated by state
or federal law. Don’t believe them!
Agents should be aware that these dis-claimers
will not protect those who
violate the North Carolina Securities
Act. These securities products often
have attractive terms, are often described
as “safe” or “guaranteed” investment
products, purport to offer unreasonably
high rates of return, and usually have
lucrative sales incentives or commis-sions.
Recent examples of these products
include “prime bank” notes, brokered or
callable certificates of deposit, offshore
investments, bond trading programs and
promissory notes.
The Department of the Secretary
of State, through the Securities
Division, regulates the offer and sale of
investments by and to North Carolina
residents. Under North Carolina law,
sales of unregistered securities or sales
of securities by unregistered persons,
as well as other violations of the anti-fraud
provisions of the North Carolina
Securities Act, carry possible civil and
criminal penalties.
Certain essentially “passive” investment
products have also been marketed to
the public in recent years, including pay
telephone investments, ATM investment
and equipment sale and leaseback op-portunities.
Please be aware that such
passive investment products, where the
investor does not have to actively partici-pate
in managing the business in order
to realize investment profits, are “securi-ties”
and are subject to intensive regula-tion
under the securities laws.
Any offer or sale of these products also
subjects the seller to the stockbroker reg-istration
provisions of the North Caro-lina
Securities Act. Additionally, even
though under current North Carolina
law variable annuities are not considered
“securities,” the persons who offer and
sell them are required to be registered as
representatives.
Generally speaking, people who engage
in the business of advising others for a
fee as to the value of securities or as to
the advisability of investing in, purchas-ing
or selling securities, are required to
be registered with the Securities Divi-sion
as investment advisers. Providing
investment advice or asset management
services for a fee without proper state
registration, or making misrepresenta-tions
or omissions of a material fact in
the course of providing investment advi-sory
services, can subject you to civil and
criminal penalties, as well as subject you
to lawsuits brought by your clients.
Insurance agents who are approached
to market one of the above-mentioned
types of investments, to provide
investment advisory services for a
fee or to solicit investment advisory
services on behalf of another, but
are not registered as a stockbroker,
investment adviser or investment
adviser representative should
contact the Securities Division at 1-800-
688-4507 to determine:
1. whether the investment is required
to be registered as a security;
2. whether the agent should be regis-tered
as a stockbroker in order to
offer or sell these investments; and
3. whether the agent should be reg-istered
as an investment adviser or
investment adviser representative
before giving investment advice or
managing someone’s investments,
or soliciting investment advisory
services on behalf of another.
If you have any questions about these
matters, or have been approached by
someone to participate in some of these
activities, please contact the Securities
Division so that we can stop potential se-curities
fraud. For more information, call
1-800-688-4507, or visit the Secretary of
State’s Web site at www.sosnc.com.
Message to Agents from DOI, Secretary of State:
Know the Signs of Investment Fraud! Securities Laws
May Apply to Your Business
Please be aware that such
investment products are subject to
intensive regulation.
Eye on DOI
On Dec. 22, 2005, President Bush
signed the Terrorism Risk Extension Act
of 2005 into law. This law extends the
Terrorism Risk Insurance Act of 2002
(TRIA), which provides a federal back-stop
for defined acts of terrorism and
imposes certain obligations on the insur-ance
industry. TRIA was developed in
response to the substantial losses experi-enced
by the industry resulting from the
tragic events that occurred on Sept. 11,
2001. Through the Extension Act, it is
now extended through Dec. 31, 2007.
Several provisions of TRIA have changed
in the recent extension; these changes
include:
1. Deletion of commercial automobile,
burglary and theft, surety,
professional liability (with the
exception of directors and officers
liability) and farmowners multiple
peril coverages from eligible lines.
2. Increase in the individual company
deductible for 2006 and 2007
to 17.5 percent and 20 percent,
respectively.
3. Increase the industry aggregate
retention level from $15 billion to
$25 billion in 2006 and to $27.5
billion in 2007.
4. Reduction in the federal share of
compensation for covered losses
from 90 percent to 85 percent for
2007.
5. Maintains the $5 million threshold
for certification of a terrorist act,
while establishing a per event trigger
for federal participation in aggregate
insured losses of $50 million for
losses occurring after March 31,
2006, and before Jan. 1, 2007, and
$100 million for losses occurring in
the 2007 program ending year.
6. Extension of existing litigation
management provisions and
codification of regulations requiring
submission and approval of
proposed settlements.
“Basically, according to the federal
Department of the Treasury,
insurers have until Jan. 31, 2006, to
offer terrorism insurance to those
policyholders whose coverage was
scheduled to lapse in connection with
TRIA’s expiration on Dec. 31, 2005,”
explains Fred Fuller, DOI’s deputy
commissioner for the Property and
Casualty Division. “But, insurers will
not be required to make new offers
of terrorism to policyholders who
previously declined coverage that would
have been in effect in 2006.”
The National Association of Insurance
Commissioner’s (NAIC) adopted a
model bulletin on Dec. 28, 2005,
that is intended to aid state insurance
regulators in advising insurers about
regulatory requirements related to the
Extension Act. Further, the bulletin
provides guidance to insurers related to
rate filings and policy form language that
state regulators would find acceptable to
protect businesses from acts of terrorism.
“Currently, the Department is working
to adopt a version of the NAIC model
bulletin that advises insurers of these
Extension Act changes and provides
them with guidance about whether rate
and policy form filings might be needed
in North Carolina,” Fuller stated.
Terrorism Risk Insurance Extension Act of 2005
New Companies in
2005
Allstate Property and Casualty
Insurance Company, 12-31-05
American Equity Investment Life
Insurance Company, 04-15-05
Atlantic Coast Life Insurance
Company, 09-30-05
COUNTRY Life Insurance
Company, 05-13-05
Coastal Casualty Insurance
Company, 12-31-05
EastGUARD Insurance Company,
04-15-05
Fidelis SecureCare of North
Carolina, Inc., 07-15-05
General Fidelity Insurance
Company, 04-15-05
Housing Authority Property
Insurance, A Mutual Company,
06-15-05
MGIC Indemnity Corporation,
03-21-05
Nationwide Insurance Company
of America, 08-12-05
Progressive Halcyon Insurance
Company, 12-31-05
Starmount Life Insurance
Company, 11-10-05
United Concordia Life and Health
Insurance Company, 02-15-05
VantisLife Insurance Company,
04-15-05
Western General Insurance
Company, 04-15-05
New Phone Number for Agent Services
The phone number for the Agent Services Division has changed!
Please update your records and make note of it.
(919) 807-6800
When you call the Division after May 22, 2006, you will hear
an automated attendant feature which will give you prompts
to direct your call. The Division has a staff of specialists who will assist
licensees with licensure and compliance questions.


Spring 2006
The Agent Services Division has seen
a recent upswing in the number
of inquiries from agency manag-ers
wishing to employ convicted felons
— and the trend causes some concern.
These managers wish to hire convicted
felons not to handle insurance work that
requires a license, but rather for general
office duties. While such a job descrip-tion
fits within the exception of who
needs to hold a license, the Department
urges caution — in today’s increasingly
downsized and computerized agency,
there are fewer activities that fit within
the licensure exception.
If you, as an agency manager, intend to
hire a new receptionist, ask yourself: will
this person only answer the phone and
greet visitors? Or will there be occasion
for this person to give insurance quotes
to clients or prospective clients?
All agency managers and employees
should be aware of the provisions of the
federal Violent Crime Control and Law
Enforcement Act of 1994 (the Act),
18 U.S.C. §§ 1033 and 1034. The Act
prohibits a person who has been con-victed
of certain crimes from engaging
in the business of insurance unless that
person obtains written consent from the
appropriate chief state insurance regula-tory
official — for North Carolina, that
would be Insurance Commissioner Jim
Long. This broad definition makes the
Act applicable to anyone working for an
insurance agency, regardless of whether
or not that person is acting as an agent.
The Act provides for federal penalties,
both for the convicted person and any
employer of that person in the business
of insurance if the commissioner’s con-sent
is not obtained.
The Act realizes that those who made
poor choices in the past could poten-tially
demonstrate that they deserve a
second chance. Individuals who merit a
second chance can be employed in the
business of insurance; however, they
must first receive the required consent.
There are no exceptions, and individu-als
must obtain the consent before being
employed in an agency. As an employer
in the business of insurance, your duty
is to identify these individuals and guide
them in the right, and lawful, direction.
Felonies Explained
The felonies that fall under the Act
include those involving dishonesty or
breach of trust. Examples include, but
are not limited to, embezzlement, theft,
misappropriation and fraud. It is impor-tant
that employers screen employees for
all felonies, because ignorance to prior
felony convictions involving dishonesty
or breach of trust is not an excuse for
failing to comply with the Act; further,
ignorance does not exempt employers
from receiving penalties.
Business of Insurance
The Act defines the business of
insurance as:
a) the writing of insurance, or
b) the reinsuring of risks,
by an insurer, including all acts necessary
or incidental to such writing or reinsur-ing
and the activities of persons who act
as, or are, officers, directors, agents, or
employees of insurers or who are other
persons authorized to act on behalf of
such persons;
It is also important to note that DOI has
taken the position that anyone working
in any capacity in an insurance agency
must obtain the required consent.
Written Consent
All requests for written consent are pro-cessed
by DOI’s Agent Services Division.
The application for the commissioner’s
consent appears on the Department’s
Web site, www.ncdoi.com/Industry/
Agent/Licensing/Forms/FedCrime.PDF.
The written consent application and
required documents should be sent to
DOI’s Agent Services Division; because
the application requires court documen-tation,
it is recommended that all forms
be sent via overnight delivery to: NC-DOI,
Agent Services Division, 430 N.
Salisbury Street, Raleigh, NC 27603.
The Agent Services Division can process
a request for the Commissioner’s consent
in approximately two week’s time, de-pending
upon existing workload. Please
note that a person may not work in an
agency while awaiting the Commission-er’s
consent, and doing so exposes both
the employer and employee to the fol-lowing
penalties:
• Any person who has been convicted
of a felony involving dishonesty or
breach of trust and willfully engages
in the business of insurance without
the commissioner’s consent will be
fined, or imprisoned for not more
than five years, or both.
• Any individual engaged in the busi-ness
of insurance who willfully per-mits
the participation in the agency
of such a person will be fined, or
imprisoned for not more than five
years, or both.
Due Diligence
Here are suggested guidelines to ensure
that you exercise due diligence to protect
you and your agency from violating the
Act:
1. Have a felony criminal conviction
question as part of your employment
application.
2. If the person has a felony conviction,
complete the application for the
commissioner’s consent and submit
the application to the Agent Services
Division for review and approval.
Occasionally, DOI receives application
for consent for a felony that is not cov-ered
by the Act; in this case, the person
will receive a letter stating that the felony
does not require the commissioner’s con-sent.
If you have a question about the
criminal past of a current or potential
employee, call Elizabeth Guido or Rob-ert
Cunningham in the Agent Services
Division at (919) 807-6800.
Felony Convictions: How They Affect Your Agency
10
Eye on DOI
Insurance Agents
Christopher S. Russell, License Denial Upheld by
Administrative Hearing, 1/14/05, Property/Liability,
Concord
Ana C. Colon, Voluntary Surrender, 1/19/05
Property/Liability, William Laurie Nationwide
Agency, Charlotte
Angela H. Vestal, $500 administrative fine,
1/28/05, Life/Health; Property/Liability; Med Supp/
LTC; Motor Club; Broker, Advantage Insurance
Services, Asheboro
Gary Bryant, $250 administrative fine, 2/18/05,
Life/Health; Property/Liability, Gastonia
Melanie D. Frye, Voluntary Surrender, 2/24/05,
Property/Liability; Broker, Summit Insurance
Agency, Asheboro
Teresa D. Brank, Voluntary Surrender, 3/1/05,
Property/Liability, Brank Insurance, Weaverville
Larry M. Drake, Voluntary Surrender, 3/2/05, Life/
Health; Property/Liability; Med Supp/LTC; Broker,
Denver Insurance Agency, Lumberton
Rebecca F. Bright, $500 administrative fine,
3/16/05, Life/Health; Property/Liability; Med Supp/
LTC; Broker, formerly of NC Farm Bureau Mutual
Insurance Co., Kinston
Dyrell M. Oates, $500 administrative fine, 3/22/05,
Life/Health; Property/Liability; Motor Club, Mt.
Olive
Louann M. Gimber, Voluntary Surrender,
4/1/05, Life/Health, Property/Liability, formerly of
Summerlin Insurance and Realty, Inc., Jacksonville
Robert A. Roberts, Voluntary Surrender, 4/1/05,
Life/Health; Property/Liability; Med Supp/LTC;
Broker, formerly of Roberts Insurance Agency,
Wilmington
Karl Rabe, License Denial Upheld by
Administrative Hearing, 4/7/05, Life/Health,
Carrboro
Thomas C. Bradley, License Revoked, 4/8/05,
Life/Health; Med Supp/LTC, formerly of Bradley
and Associates, Pinehurst
Wesley K. Miller, Voluntary Surrender, 4/18/05,
Life/Health; Property/Liability, formerly of First
Choice Mobile Homes, Kinston
Troy G. Clark, Voluntary Surrender, 4/19/05,
Life/Health, Lexington
Michael C. Carbajal, License Suspended for six
months, 4/21/05, Life/Health; Property/Liability;
Med Supp/LTC; Motor Club, Veracruz Insurance
Agency, Charlotte
Emily R. Villegas, Voluntary Surrender, 5/18/05,
Property/Liability, formerly of Olympia Latin
Services, Charlotte
Brenda B. McClellan, $2,000 administrative fine,
6/3/05, Life/Health; Property/Liability; Broker,
McClellan Insurance Agency, Inc., Spruce Pine
Ashley J. “AJ” Baugstat, $250 administrative fine,
6/10/05, Life/Health; Med Supp/LTC, Harrisburg
Ivon Medina, $1,000 administrative fine, 6/10/05,
Life/Health; Property/Liability, formerly of Allstate,
Charlotte
Joseph S. Brown, IV, $500 administrative fine,
6/10/05, Life/Health; Property/Liability, formerly of
United Healthcare, Greensboro
Jordan H. Wilkins, License Revoked, 6/27/05,
Life/Health; Property/Liability, Louisburg
Joseph S. Brown, IV, License Surrender, 7/14/05,
Life/Health, Greensboro
Patrick J. Cusack, $100 administrative fine,
8/23/05, Life/Health; Property/Liability; Med Supp/
LTC; Broker, Asheville
Duncan H. Dawkins, Voluntary Surrender,
7/28/05, Life/Health, formerly of Mountain Eagle
Insurance Agency, Hendersonville
Lisa D. Yates, Voluntary Surrender 7/28/05,
Life/Health; Property/Liability, formerly of
Mountain Eagle Insurance Agency, Hendersonville
William R. Goldstein, Voluntary Surrender,
8/24/05, Life/Health; Property/Liability, Charlotte
Ann Y. Williams, Voluntary Surrender, 9/14/05,
Credit Life; Credit Unemployment, Bunn Level
Amanda J. Boyd, Voluntary Surrender, 10/3/05,
Property/Liability, formerly of Winterville Insurance
Agency, Greenville
Willard D. McNair Jr., $1,350 administrative fine,
10/6/05, Life/Health; Property/Liability; Broker,
Laurinburg
Arthur Mitchell, Jr., $1500 administrative fine,
10/6/05, Life/Health; Property/Liability, Allstate
Mitchell Agency, Elizabeth City
Terry W. Johnson, Voluntary Surrender, 10/19/05,
Life/Health; Med Supp/LTC, Willow Springs
Annie M. Green, Voluntary Surrender, 10/24/05,
Property/Liability, formerly of Gateway Insurance
Service, Elizabeth City
Joseph F. Lineberger, Voluntary Surrender, 11/10/
05, Life/Health; Property/Liability; Broker, formerly
of AB Insurance Agency, Charlotte
John F. McLure, Voluntary Surrender, 11/10/05,
Life/Health; Property/Liability; Med Supp/LTC;
Broker, formerly of McLure Insurance Agency,
Pinehurst
Angela R. Queen, Voluntary Surrender, 11/10/05,
Property/Liability, formerly of AllCare Insurance
Agency, Charlotte
Margaret C. Humphrey, Voluntary Surrender,
12/6/05, Life/Health; Property/Liability; Med,
formerly of the Nationwide-Brent King Agency
Supp/LTC, Kinston
Larry T. Russ, Voluntary Surrender, 12/6/05,
Property/Liability, formerly of S&D Insurance
Agency, Concord
James R. Dupree, Voluntary Surrender, 12/9/05,
Life/Health; Property/Liability; Broker, formerly of
Dupree Ins. Services LLC, Raleigh
Spyros Kroustalis, Voluntary Surrender,
12/29/05, Life/Health, formerly of United
Healthcare, Clemmons
Winsome Purrier-Epting, $500 administrative fine,
1/9/06, Life/Health; Property/Liability,, formerly of
Allstate, Fayetteville
Bail Bondsmen
Eagle A. Collins, $500 administrative fine, 3/11/05
Surety Bail Bondsman, Manteo
Ronald K. Baker, $500 administrative fine, 3/16/
05, Surety Bail Bondsman, Goldsboro
Ondra D. Richardson, License Revoked, 4/20/05,
Surety Bail Bondsman, Charlotte
Andrea L. Grizzle, $500 administrative fine,
5/3/05, Surety and Professional Bail Bondsman,
Moyock
Andrew E. Harris, III, $750 administrative fine,
7/18/05, Surety Bail Bondsman, Durham
Bobby L. Jenkins, $500 administrative fine, 8/1/05,
Surety and Professional Bail Bondsman, Wilson
Shawn T. Williams, $500 administrative fine,
6/13/05, Surety Bail Bondsman, Wilmington
Calandra W. Gray, $250 administrative fine,
8/10/05, Surety Bail Bondsman, Charlotte
Leroy C. Richardson, $750 administrative fine,
8/10/05, Surety Bail Bondsman, Winston-Salem
Crystal B. Wright, $250 administrative fine,
8/22/05, Surety Bail Bondsman, Gastonia
Derrick D. Harrington, $1,000 administrative fine,
9/1/05, Surety Bail Bondsman, Raleigh
Elliot C. Hunter, $750 administrative fine,
10/24/05, Surety Bail Bondsman, Charlotte
George Lilly, Jr., $250 administrative fine, 12/9/05,
Surety and Professional Bail Bondsman, Fayetteville
Carlester J. Massey, $500 administrative fine,
12/19/05, Professional Bail Bondsman, Charlotte
Insurance Companies
Harco National Ins. Co, $1,000 administrative
fine, 5/5/05, Surety Company, Raleigh
Collection Agencies
Syndicated Office Systems, $1000 administrative
fine, 1/18/05, Anaheim, CA
Commercial Recovery Systems, $5000
administrative fine, 3/29/05, Dallas, TX
Collectors Training Institute, $500 administrative
fine, 4/21/05, Chicago, IL
National Credit Systems Inc., $1,000
administrative fine, 7/7/05, New York, NY
Premium Finance Companies
Columbus Insurance Finance Company, $1000
administrative fine, 7/18/05 Whiteville
The Hallmart Agency, Inc., $1000 administrative
fine, 7/27/05, Wilson
Market Examinations Division
Provident Life and Accident Insurance Company,
settled on 3/11/05 for $70,250.00.
Massachusetts Mutual Life Insurance Company,
settled on 5/4/05 for $97,700.00.
WellPath Select, Inc, settled on 5/5/05 for $9,200.
BlueCross BlueShield of North Carolina, settled
on 6/10/05 for $6,600.
American General Life & Accident, settled on
6/27/05 for $124,150.00.
Waddell & Reed Companies (Multi-State), settled
on 8/17/05 for $12,761.65.
New York Life Insurance Co., settled on 9/1/05 for
$31,400.
Republic Western (Bid Rigging), settled on 9/9/05
for $20,000.
Celtic Insurance Company, settled on 10/18/05 for
$37,900.
BlueCross BlueShield of NC, settled on 12/8/05
for $15,700.
Regulatory Actions for 2005
11
Spring 2006
Just last year, the Market
Examinations Division got bigger.
This Division, which is responsible
for conducting examinations of life
and health, property and casualty and
premium finance companies, absorbed
what was previously the Managed Care
and Health Benefits Division. Now
the Division also reviews annual filings
submitted by health maintenance
organizations (HMO) and preferred
provider organizations (PPO). The
Division’s main purpose is to determine
whether companies are in compliance
with relevant statutes and administrative
codes pertaining to the business of
insurance in North Carolina.
Historically, examinations were
scheduled based on the insurer’s market
share, number of consumer complaints
on file, date of last examination and
premium volume written in the state
of North Carolina; however, this
approach has been discontinued in
favor of a market analysis approach.
This new approach involves gathering
and analyzing data on specific insurers,
and permits a more in-depth review
of filed complaints to identify areas of
concern that may result in compliance
problems that may warrant some form
of regulatory resolution.
“Our market analysis unit was
implemented in March 2005 and
currently consists of four market analysts
and a market analysis manager,” explains
Ernest Nickerson, deputy commissioner
for the Market Examinations Division.
“In the last five years, the Department’s
market conduct exams have yielded in
excess of $28 million to North Carolina’s
consumers because of the insurers’
noncompliance with relevant insurance
laws.” (see Figure 1 for details)
The Division is currently comprised
of three life and health examination
teams and two property and casualty
examination teams which have
completed an average of 48 examinations
per year during the past five years (see
Figure 2). Examination results reveal
that the majority of the monies returned
to affected policyholders stem from the
insurers failure to process life and health
claims accurately and/or timely, failure
to apply the correct or approved rates
for property and casualty policies, and
failure to refund the correct amount of
monies resulting from private passenger
automobile rate settlements.
Market Examinations — How DOI Helps Companies and Consumers
Market conduct examinations
are conducted on domestic
HMOs at least every three
years as required by N.C.G.S.
58-67-100. Examinations of
domestic life and health (other
than HMOs) and property and
casualty insurers are scheduled
at least every five years; however,
unlike domestic market exams,
examinations of foreign insurers
are not required to be performed
on a routine basis. Pursuant to
N.C.G.S. 58-3-91, HMO and
PPO annual filings are reviewed
annually.
Figure 1: Five Year Historical Summary of Monies
Returned to N.C. Consumers and Producers
$0 $4,000,000 $8,000,000 $12,000,000 $16,000,000 $20,000,000
2001
2002
2003
2004
2005
Figure 2: Five Year Historical Summary
of Completed Examinations
4 7
4 9
4 2
5 0
5 3
0 1 0 2 0 3 0 4 0 5 0
2001
2002
2003
2004
2005
Since its creation in 1973, the DOI’s
Consumer Services Division has
continued to work towards its goal
of providing assistance to insurance
consumers, as well as providing accurate
and relevant information to educate
North Carolina’s consumers.
The Consumer Services Division stays
busy helping consumers who bring
their insurance questions and concerns
to us by phone, email, in writing or in
person. “During 2005, the Division
handled over 143,000 telephone calls,
which made up the majority of the con-tacts
Consumer had with the public,”
explained Bob Lisson, the deputy com-missioner
for Consumer Services. “A lot
of times, we can answer general insur-ance
questions through one of the De-partment’s
many consumer guides; last
year we distributed more than 25,000
hard copy guides, and many more were
downloaded from the Department’s Web
page, www.ncdoi.com.”
Lisson also reports that Consumer
Services processed nearly 11,000 written
complaints in 2005. “When we need to
contact an insurance company on behalf
of a consumer, we ask that a written
complaint be filed with our Division,”
he stated. While the specialists were not
able to satisfy every consumer complaint,
many insurance problems were resolved
after the DOI became involved. In fact,
Departmental involvement benefited
North Carolinians to the tune of
approximately $14,780,000. Consumers
were assisted with issues such as payment
of claims, return of premium and
reinstated coverage.
“Consumers in North Carolina can
always find someone willing to assist
them at the Department of Insurance,”
said Lisson. “Anyone with insurance-related
problems or questions can reach
the Consumer Services Division by
calling 1-800-546-5664 or visit us
online at www.ncdoi.com.” The
Consumer Services Division may
also be reached by mail at
1201 Mail Service Center,
Raleigh, NC 27699-1201.
Consumer Services Continues Tradition of Helping,
Educating North Carolina’s Citizens
The following amounts represent
the approximate dollar amounts
recovered by North Carolina
consumers, in conjunction with
complaints submitted to the
Department of Insurance (for
complaints closed during calendar
year 2005). These amounts are
rounded up and are broken down by
line of business.
Automobile $1,632,456
Homeowners $621,915
Liability $62,189
Fire, Allied and CMP $95,681
Miscellaneous Lines $908,842
Life and Annuity $6,322,740
Accident and Health $1,677,744
Health Complaints from Providers
and Facilities
$3,461,884
Total $14,783,452
Presorted Standard
U.S. Postage
PAID
Permit #1
Raleigh, NC
North Carolina Department of Insurance
1201 Mail Service Center
Raleigh, NC 27699-1201
www.ncdoi.com
This newsletter was printed at a cost of $xxx or $0.xx per copy.

Spring 2006
Prepared by the North Carolina Department of Insurance
Flood Coverage: A New Approach for
Agents, Better Service for Clients
Insurance Commissioner Jim Long
asks: do you fully understand the
importance of flood insurance?
Whether you are an agent or adjuster,
insurance executive or just a homeowner
yourself, flood insurance should be on your
mind. Every North Carolinian should con-sider
whether he or she needs the coverage;
but insurance agents should take on an ad-ditional
burden — learning enough about
the coverage to properly advise clients.
Commissioner Long
is urging agents across
the state to consider
flood insurance in a
different light.
“As yet another hur-ricane
season gets underway, with last year’s
extensive flooding in spots around the na-tion
still fresh on our minds, I want to take
this opportunity to suggest a slightly differ-ent
approach to flood insurance — treat it
as a valuable product in the portfolio you
offer your clients,” he says. “Many prod-ucts
available today are of interest to only
a small portion of consumers, but often
agencies advertise them as products that are
available for purchase; I encourage you to
make flood insurance one of the products
that you talk with your clients about.”
An NAIC flood insurance study group
contends that one of the largest problems
with flood coverage is just plain igno-rance
on the part of agents, adjusters and
insureds alike. Since flooding can be a
problem in North Carolina, it is important
for agents and adjusters to be familiar with
flood coverage.
“You wouldn’t sell auto, home or business
insurance without being familiar with the
product so that you can offer your client
informed advice and the same should hold
true for flood insurance. If you’re not famil-iar
with it, take the steps necessary to learn
about it,” Long says. “A good starting point
for learning about
flood insurance is
continuing educa-tion;
we’ve included
a flood course in the
continuing educa-tion
program since
1999, so if you haven’t taken it yet, take
it this year, and if you took it several years
ago, take it again, as the program is always
changing.”
The Department’s Web site,
www.ncdoi.com, contains a section that
can help consumers understand specific
types of insurance, including flood insur-ance.
By selecting “flood insurance,” con-sumers
can read about the most frequently
asked questions, including what a flood
policy covers, what it doesn’t cover, and any
restrictions that might apply. This consum-er
section provides a good primer on flood
coverage, and there is also a link to the
Continued on page 2...
Flood insurance is a
valuable product in your
portfolio.
p 3
Fighting Insurance Fraud
pp 4 - 5
Staff Changes at NCDOI
p 6
Agent Advertising Rules
New Record Lookup System
p 7
Securities, Investment Fraud
p 8
New Phone # in Agent Services
p 9
Hiring a Felon? Things to Know
p 10
Regulatory Actions for 2005
p 11
History of Market Examinations
Back
Consumer Services Stats
Eye on DOI
Agent Services Division generates several
thousands of letters each year to our
agents, brokers, adjusters, bail bondsmen
and business entities. Unfortunately,
many of these communications are
never seen by our licensees because the
addresses we have on file are out of date.
It is important for all licensees to
remember that only the licensee can
update his or her address with the
Department. In accordance with
N.C.G.S. §58-2-69(b), “Every licensee
shall give written notification to the
Commissioner of any change of the
licensee’s residential address within 10
business days after the licensee moves
into the licensee’s new residence. This
requirement applies if the change of
residential address is by governmental
action and there has been no actual
change of residence location; in which
case the licensee must notify the
Commissioner within 10 days after the
effective date of the change.”
We know that our licensees do not want
to miss important information about
their license status such as continuing
education notices, renewal billings and
other updates, but the Department
cannot change a licensee’s address
from the U.S. Postal Service forward
information since we can only make the
change at the licensee’s request.
If your mailing address is a post office
box, we must have both a mailing
and physical address on record. You
can find a change of address form
on the Department’s Web site at
www.ncdoi.com.
North Carolina
Department of Insurance
1201 Mail Service Center, Raleigh, NC 27699
www.ncdoi.com
Agent Services (919) 807-6800
Consumer Services (800) 546-5664
Commissioner
Jim Long
Chief Deputy Commissioner
Barbara Morales Burke
Assistant Commissioner
Wayne Goodwin
Senior Deputy Commissioners
Louis Belo
Tim Bradley
Angela Ford
Ray Martinez
Deputy Commissioners
Kevin Conley, Actuarial Services
Etta Maynard, Agent Services
Bob Lisson, Consumer Services
Wanda Edwards, Engineering and Codes
Tony Riddick, Financial Evaluation
Richard Kinn, Investigations
Ted Hamby, Life and Health
Hazel Stephenson, Manufactured Building
Ernest Nickerson, Market Examinations
Fred Fuller, Property and Casualty
Jeff Trendel, Regulatory Actions
Carla Obiol, SHIIP
William Bradbury, Eastern Regional Office
Charles “Skeeter” Curtis, Western Regional Office
Editor— Chrissy Pearson
Contributing Editor — Kristin Milam
Designer — Cory Redick
Agents Reminded to Keep Department Advised of Address Changes
...continued from page 1.
National Flood Insurance Program
(NFIP) Web site, where consumers can
find a wealth of information and direc-tion
on how to handle flood coverage.
“To make sure your clients are the most
informed they can be, help yourself un-derstand
flood coverage, ” urges Long.
Some tips for becoming more familiar
with flood insurance include:
Know your community and the poten-tial
product market. Your client does
not have to live on a major river or near
the ocean to qualify for flood coverage.
Any resident of a jurisdiction participat-ing
in the NFIP is eligible to purchase
coverage. North Carolina victims of the
2004 hurricane floods were mostly in the
mountains, far from the ocean. A tropi-cal
storm can turn a peaceful mountain
creek into a raging river overnight.
Know how to write a flood policy. If
a client requested an auto policy, you
would know how to quote a premium,
which application to fill out and what
information is needed in support. Can
you do the same if a client needs or
wants flood coverage?
Establish a relationship with either the
NFIP or a Write Your Own (WYO)
program. You don’t include business
coverage in your advertisements and then
go looking for a company when you have
a client. Investigate your major carriers
for a WYO program and investigate how
to work directly with the NFIP. After you
decide how to go, set up a relationship
and make sure everyone in your office
who works with clients knows you are set
up to do this coverage.
Protect your client and yourself. Make
sure every client who might be eligible
for flood coverage is offered flood insur-ance.
Don’t be the agent who gets to
tell a client whose home or business was
destroyed by a flood that they could have
purchased coverage from you had they
only asked. Tell them they can buy it and
from you, their agent.
Include flood on a worksheet that asks
the questions about the extra coverages
that apply to home or business property
packages. Use this when selling or re-viewing
your client’s coverage, and if you
client declines the coverage, obtain their
signature on the form.
Don’t be ignorant of coverage that could
help your clients. Learn how flood insur-ance
can enhance your portfolio and bet-ter
the services you offer your customers.
Says Long, “Your client will thank you
and your community will be better off
for the effort.”
Spring 2006
The Department’s Investigations
Division saw the conclusion to
one of their largest insurance
fraud cases in years in 2005, when
they successfully shut down a major
auto insurance fraud ring in North
Carolina.
In cooperation with the North Carolina
Attorney General’s Special Prosecutions
Unit, the United States Postal Inspectors
Service and the National Insurance
Crime Bureau (NICB), and along
with special investigative units from
Nationwide, State Farm, Allstate
and GMAC insurance companies,
investigators brought to justice
eight ringleaders of the scheme,
which included an extensive
family network of fraudsters in
Siler City.
Investigators found that the fraud
ring filed at least 480 fraudulent
auto crash claims with insurance
companies since 1992. The companies
paid out an estimated $2 million in
phony claims.
Investigators were tipped off by the
insurance companies and a special agent
from NICB, who began to notice a
trend in auto accident claims from the
Chatham County, Randolph County
and Alamance County areas. Specific
interest grew as the claims began to
concentrate on the cities of Siler City
and Asheboro. City, county and state law
enforcement agencies were briefed on
the trends and joined the elaborate task
force, which Department investigators
cite as being one of the most
technologically advanced investigative
endeavors to date.
Relying heavily on a computerized link
analysis provided by the Chicago Office
of NICB, investigators were able to
show the relationships and frequencies
of each suspected family member
in the fraud ring. Combining the
computerized forensics available today
with old fashioned police work, the
task force infiltrated the family network
and obtained sufficient evidence for the
Chatham County grand jury to return
45 separate indictments on eight key
suspects.
An April 12, 2005, early morning
raid produced seven arrests. In the
months that followed, the Attorney
General’s special prosecutor presented
overwhelming evidence condemning
the seven, who then entered negotiated
guilty pleas in Chatham County
Superior Court. “I’m so proud that the
Department had a hand in bringing
these criminals to justice,” said Insurance
Commissioner Jim Long. “I hope
this can serve as a lesson to others
who are considering committing
insurance fraud.”
During his 21 year tenure,
Commissioner Long has
demonstrated a “zero tolerance”
position regarding insurance
fraud. Keeping North Carolina’s
auto insurance rates the fifth
lowest in the nation requires not only
strict and aggressive enforcement, but
also educational efforts. By working
together with federal, state and local
law enforcement agencies, Department
investigators hope to make North
Carolina a tough place to commit
insurance fraud.
Department Investigators Fight Insurance Fraud
A Closer Look at Staged Accidents in North Carolina
$
$ $ Industry statistics
estimate that 10 cents of every
dollar spent in insurance
premiums go towards paying a
fraudulent claim.
In November 2005, the U.S. Depart-ment
of Justice certified North Carolina’s
Accessibility Code as being compliant
with the Americans with Disabilities Act
(ADA) Accessibility Guidelines. As only
the sixth state in the nation to adopt an
accessibility building code that meets
federal approval, the newly certified Ac-cessibility
Code will improve access for
persons with disabilities in communities
throughout the state.
While the certification went into effect
last November, several North Carolina
Department of Insurance Office of State
Fire Marshal (OSFM) employees worked
toward ADA compliance for many
years. In fact, OSFM’s own Jeff Kanner
personally wrote and illustrated the new
Accessibility Code, which is considered
a separate volume in the state’s building
code.
“I know the hard work that went into
getting this code written and approved
by the Department of Justice will be
well worth it,” said Insurance Commis-sioner
and State Fire Marshal Jim Long.
“I’m proud that our folks played such a
major role in improving the way North
Carolina’s citizens with disabilities will
get around everyday.”
Accessibility Code Certified by U.S. Department of Justice
North Carolina Only the 6th State to Receive Federal Approval
Eye on DOI
In an effort to always serve the people
of North Carolina well, the Depart-ment
of Insurance saw a reshuffling
of staff during the past year. Some new
faces joined our work-force
and some long-time
employees moved
into management posi-tions
new for them.
Please join us in con-gratulating
and welcom-ing
the following staff.
Barbara Morales
Burke, chief dep-uty
commissioner
— Morales Burke, a
familiar face in the
Department, previously
served as assistant com-missioner,
senior dep-uty
commissioner for
Technical Services and
deputy commissioner for
Managed Care. She has
worked with private health insurance
organizations including the N.C. State
Employees’ Health Plan. Morales Burke
graduated from Fordham University
in New York with a degree in business
administration and finance, and has an
M.H.A. from the University of North
Carolina, Chapel Hill. When she’s not
working, Barbara enjoys cooking and
fine dining and, along with her with
her husband Scott, taking long walks
with their beagle, Beauregard.
Wayne Goodwin, assistant commis-sioner
— Goodwin previously served as
assistant general counsel for DOI. Prior
to coming to work with the Depart-ment,
Goodwin practiced law in Rich-mond
County and served four terms in
the N.C. House of Representatives. He
also served as adjunct professor at Rich-mond
Community College. Goodwin
is a graduate of the University of North
Carolina, Chapel Hill where he earned
degrees in political science and law. He
is married to State Representative Mela-nie
Wade Goodwin and they have one
daughter, Madison.
Ray Martinez,
senior deputy for
Company Services
— Martinez worked
with the Department
for 18 years as depu-ty
commissioner for
Financial Evaluation
prior to becoming
senior deputy. Before
he came to DOI,
Martinez worked
for Peat, Marwick,
Mitchell and Com-pany,
and served as
chief financial officer
for two insurance
companies. He is
a licensed certified
public accountant in New York and
Florida and got a degree in accounting
from Iona. Ray lives in north Raleigh
with his wife Andrea and their two dogs.
Larry Brewer, chief information sys-tems
officer — Brewer has worked
continuously with DOI since 1972, the
longest continuous tenure of anyone
currently still with the Department. For
the last 20 years, Brewer
has been with Information
Systems; prior to that he
worked in the Consumer
Services Division as well
as the Fire and Casualty
Division. He is a graduate
of North Carolina State
University with a degree
in applied mathematics.
Brewer is married with
two children and one set
of twin grandchildren.
Kevin Conley, chief actuary —
Conley worked for the Department for
barely a year prior to becoming chief
actuary; however, he has been an actuary
for more than 20 years, previously work-ing
for APCapital, the state of Iowa,
CNA and Allstate. He is a fellow of the
Casualty Actuarial Society and gradu-ate
of Valparaiso University of Indiana,
where he majored in both history and
math. Kevin and his wife, Patsy, have
seven children, ranging from 4 to 16.
Wanda Edwards, deputy commis-sioner,
Engineering Division —
Edwards was promoted to deputy com-missioner
after serving for several years
as a supervisor and code consultant
in the Engineering Division. She has
degrees in both architecture and civil
engineering with a construction option
from North Carolina State University;
Edwards also has a Professional Engineer
designation. Prior to coming to DOI,
she was self-employed as president of a
construction company and worked for
Carolina Power and Light (now Progress
Energy). She has two children, Patrick
and Adrienne Piche.
Fred Fuller, deputy commissioner,
Property and Casualty Division —
Fuller has worked in the Department
for 15 years in both the Property and
Casualty and Market Examinations
Department Congratulates Thirteen New Deputy
Commissioners, Senior Staff Members
Wayne Goodwin and Barbara
Morales Burke
Ray Martinez, Jeff Trendel and Tony Riddick
Spring 2006
Divisions. Prior to coming to work for
DOI, he worked for Crum and Forster.
Fuller has a degree in business adminis-tration
from East Carolina University.
He and his wife Krista have one son,
Jack, who is in the first grade, and one
55 lb. black poodle, Zoe.
Ted Hamby, deputy commissioner,
Life and Health Division — Over the
past 18 years, Hamby has worked in
management positions in the Managed
Care, Life and Health and Consumer
Services Divisions. Prior to coming to
DOI, Hamby worked 19 years in the in-surance
industry with experience in un-derwriting,
claims and sales administra-tion.
He has a Fellow designation from
the Life Office Management Association
and various other industry educational
designations and achievements. He and
his wife Roberta have a son who is a cer-tified
public accountant and a daughter
with two grandchildren.
Bob Lisson, deputy commissioner,
Consumer Services Division — Lis-son
was assistant deputy commissioner
of the Managed Care Division for five
and a half years, prior to moving into
the Consumer Division. Before joining
the Department, he was employed in the
managed care sector with the Morrisville
regional office of Magellan Behavioral
Health. Lisson has an undergraduate de-gree
in economics and psychology from
Duke, and a masters and Ph.D. from the
University of North Carolina, Greens-boro.
He lives in Raleigh with his wife
Lisa, who is a physical therapist at Duke
Health Raleigh
Hospital, and their
two children ages
11 and 7.
Etta Maynard,
deputy commis-sioner,
Agent
Services Division
— Maynard has
been involved
in the insurance
arena for 19 years,
with experience in
both operations and underwriting in
the personal lines market. Her regula-tory
experience began in 2000 when she
came to DOI as the agency examination
supervisor. Maynard has a degree from
the University of North Carolina at
Pembroke and is a member of the Insur-ance
Regulatory Examiners Society.
She lives with her husband,
Tom, and their dog,
Abigail. Her interests
include going to the
beach, reading, and
hosting social events
with her husband.
Tony Riddick, deputy
commissioner, Finan-cial
Evaluation Divi-sion
— Riddick worked
with the Department in
the Financial Evaluation
Division as an examiner
and examination super-visor
for more than 11
years prior to becom-ing
head of the
Division. He is a certified public
accountant and certified finan-cial
examiner. Prior to working
with the Department, he worked
for Reliance Insurance Company
and Great American Insurance
Company. Riddick is a gradu-ate
of North Carolina Central
University with a degree in ac-counting.
He is on the board of
directors for the North Carolina
Association of Certified Public
Accountants and the Society of Financial
Examiners. He and his wife, Sharon,
have been married for 15 years, and he
is an active volunteer with the youth
mentoring organi-zation,
100 Black
Men of America.
Hazel Stephen-son,
deputy
commissioner,
Manufactured
Building Division
— Stephenson has
worked with the
Department for
more 20 years, all
of that time with
the Manufactured
Building Division.
Her duties in that division included serv-ing
as a hearing officer and supervisor.
Prior to DOI, she worked with the De-partment
of Transportation. Stephenson
is married and has
two daughters, but
she is most proud
of being a doting
grandmother to
her six grandchil-dren,
five boys and
one girl.
Jeff Trendel,
deputy commis-sioner,
Regula-tory
Actions
Division —
Trendel worked for
the Department
for eight years
prior to his promo-tion
to the Regulatory Actions Division,
with most of that time spent as manager
of the special entities section in the Fi-nancial
Evaluation Division. Prior to
working with the Department, Trendel
worked for Raleigh Federal Savings
Bank. He is a 1988 graduate of the
Citadel, the Military College of South
Carolina, with a major in business ad-ministration.
Trendel is married with five
sons ranging in age from 2 to 17, and is
actively involved in coaching both bas-ketball
and baseball.
Bob Lisson
Fred Fuller, Etta Maynard and Ted Hamby
Wanda Edwards and Hazel Stephenson
Eye on DOI
DOI discovered that some agents
are not following North Carolina’s
laws regarding advertising insur-ance
products. Because these laws are
aimed at protecting consumers’ interests,
please review these laws so that you can
protect not only your clients and your-self,
but also the insurance companies for
which you work.
Independently developed advertise-ments
are a tricky issue because approval
requirements differ depending on the
advertised subject matter. First, agents
should be aware that any advertising
piece that is presented as an inducement
to purchase insurance, whether in print,
on television, on radio or in any other
form, is the responsibility of the in-surer.
This is the case regardless of who
wrote, created, designed or presented
the advertisement. In fact, many insurers
maintain strict control over the content
of advertising to avoid possible deceptive
practices which may hold them liable,
and many agents have signed contracts
with appointed companies which require
advertising approval by the company
prior to use.
North Carolina’s insurance laws explic-itly
require insurers to obtain approval
from the DOI’s Life and Health Divi-sion
prior to actually using certain adver-tising
materials. These laws specifically
pertain to long-term care, annuities,
Medicare supplement and interest sensi-tive
life products. An important detail
to note is that the Life and Health Divi-sion
accepts and reviews these materials
only when submitted by the insurer
— they do not accept, review or approve
advertising materials submitted directly
by agents.
In addition, regulations stipulate all ad-vertising
(including that which is not re-quired
to be filed with the Department)
must be sufficiently complete and clear
to avoid deception or the capacity or
tendency to mislead. These requirements
are so strict that, for example, there are
certain words that cannot be used in life
and annuity advertising.
There have been some problems with
some agents developing and using ad-vertising
materials that require prior
approval, but that were not receiving
any approval at all because it was not
understood that the materials met the
definitions of “advertisements” found
in the North Carolina Administrative
Code. Specifically, the two areas of con-cern
are materials used in sales seminars
conducted by agents and sales presenta-tion
spreadsheets, which consolidate the
policy terms and conditions of different
insurers for side-by-side comparison.
To clear up this confusion, the North
Carolina Administrative Code 11
NCAC 12.0517 defines accident and
health advertisements to include the fol-lowing:
• printed and published material, au-dio
visual material and descriptive
literature of an insurer used in direct
mail, newspapers, magazines, radio
scripts, TV scripts, billboards and
similar displays;
• descriptive literature and sales aids
of ALL kinds issued by an insurer,
agent or broker for presentation to
members of the insurance buying
public, including but not limited to
circulars, leaflets, booklets, depic-tions,
illustrations and form letters;
• prepared sales talks, presentations
and material for use by agents,
brokers and solicitors.
Further, North Carolina Administrative
Code 11 NCAC 12.0424 defines life
insurance and annuity advertising to
include all of the above definitions found
in accident and health advertisements
and also adds:
• material designed to create public
interest in life insurance or annuities
or in an insurer, or to induce the
public to purchase, increase, modify,
reinstate, borrow on, surrender, re-place
or retain a policy;
• material used for recruitment, train-ing,
and education of an insurer’s
sales personnel, agents, solicitors,
and brokers which is designed to be
used or is used to induce the public
to purchase, increase, modify, rein-state,
borrow on, surrender, replace
or retain a policy.
The Agent Services Division has ruled
that generic business cards identifying
licensees’ qualifications do not require
prior approval by the Department;
however, if questions remain regarding
logos or content of the business card,
agents should consult with their
appointed company. Remember, too,
that all agents should submit advertising
materials to their appointed company
for approval PRIOR to use and consult
with them directly on any questions
they may have in developing material to
ensure it is in compliance with company
and DOI requirements.
Agent Advertising: What You Don’t Know Can Hurt You
Agents, need to look up your records?
Our new Record Look-Up Service is now available online!
The following information can now be obtained via www.ncdoi.com:
• license status (individual licensees and business entities)
• verification of annual renewal payments
• CE status, including listing of courses completed by year
• CE course offering and provider information by license type
Please note that the CE and licensing Voice Response Units (VRU) have been
disabled and will no longer be updated.

Spring 2006
Insurance Commissioner Jim Long
and Secretary of State Elaine
Marshall are working together to
ensure that insurance agents are
educated on North Carolina’s securities
laws and how they may affect an agent’s
business. Securities laws may apply to
types of products offered to sell.
The Secretary of State’s office has seen
an increase in fraudulent, unregistered
securities offerings and is warning
agents that the sale of these investment
opportunities may result in violations
of the North Carolina Securities Act.
As an agent, it is important that you
understand that most non-insurance
investment offerings
are considered “securities” under
both state and federal law.
Licensed insurance profession-als
are receiving solicitations
asking for their participation in
the offer and sale of various investments
and/or business opportunities to clients;
often, these solicitations promise above-average
commissions to lure you into
selling these products. These solicitations
target you because, as an agent, you have
an extensive client list and a good busi-ness
reputation in your community, so
that you can reel in unsuspecting inves-tors.
Naturally, these scam artists claim
that these investment products are not
“securities” and aren’t regulated by state
or federal law. Don’t believe them!
Agents should be aware that these dis-claimers
will not protect those who
violate the North Carolina Securities
Act. These securities products often
have attractive terms, are often described
as “safe” or “guaranteed” investment
products, purport to offer unreasonably
high rates of return, and usually have
lucrative sales incentives or commis-sions.
Recent examples of these products
include “prime bank” notes, brokered or
callable certificates of deposit, offshore
investments, bond trading programs and
promissory notes.
The Department of the Secretary
of State, through the Securities
Division, regulates the offer and sale of
investments by and to North Carolina
residents. Under North Carolina law,
sales of unregistered securities or sales
of securities by unregistered persons,
as well as other violations of the anti-fraud
provisions of the North Carolina
Securities Act, carry possible civil and
criminal penalties.
Certain essentially “passive” investment
products have also been marketed to
the public in recent years, including pay
telephone investments, ATM investment
and equipment sale and leaseback op-portunities.
Please be aware that such
passive investment products, where the
investor does not have to actively partici-pate
in managing the business in order
to realize investment profits, are “securi-ties”
and are subject to intensive regula-tion
under the securities laws.
Any offer or sale of these products also
subjects the seller to the stockbroker reg-istration
provisions of the North Caro-lina
Securities Act. Additionally, even
though under current North Carolina
law variable annuities are not considered
“securities,” the persons who offer and
sell them are required to be registered as
representatives.
Generally speaking, people who engage
in the business of advising others for a
fee as to the value of securities or as to
the advisability of investing in, purchas-ing
or selling securities, are required to
be registered with the Securities Divi-sion
as investment advisers. Providing
investment advice or asset management
services for a fee without proper state
registration, or making misrepresenta-tions
or omissions of a material fact in
the course of providing investment advi-sory
services, can subject you to civil and
criminal penalties, as well as subject you
to lawsuits brought by your clients.
Insurance agents who are approached
to market one of the above-mentioned
types of investments, to provide
investment advisory services for a
fee or to solicit investment advisory
services on behalf of another, but
are not registered as a stockbroker,
investment adviser or investment
adviser representative should
contact the Securities Division at 1-800-
688-4507 to determine:
1. whether the investment is required
to be registered as a security;
2. whether the agent should be regis-tered
as a stockbroker in order to
offer or sell these investments; and
3. whether the agent should be reg-istered
as an investment adviser or
investment adviser representative
before giving investment advice or
managing someone’s investments,
or soliciting investment advisory
services on behalf of another.
If you have any questions about these
matters, or have been approached by
someone to participate in some of these
activities, please contact the Securities
Division so that we can stop potential se-curities
fraud. For more information, call
1-800-688-4507, or visit the Secretary of
State’s Web site at www.sosnc.com.
Message to Agents from DOI, Secretary of State:
Know the Signs of Investment Fraud! Securities Laws
May Apply to Your Business
Please be aware that such
investment products are subject to
intensive regulation.
Eye on DOI
On Dec. 22, 2005, President Bush
signed the Terrorism Risk Extension Act
of 2005 into law. This law extends the
Terrorism Risk Insurance Act of 2002
(TRIA), which provides a federal back-stop
for defined acts of terrorism and
imposes certain obligations on the insur-ance
industry. TRIA was developed in
response to the substantial losses experi-enced
by the industry resulting from the
tragic events that occurred on Sept. 11,
2001. Through the Extension Act, it is
now extended through Dec. 31, 2007.
Several provisions of TRIA have changed
in the recent extension; these changes
include:
1. Deletion of commercial automobile,
burglary and theft, surety,
professional liability (with the
exception of directors and officers
liability) and farmowners multiple
peril coverages from eligible lines.
2. Increase in the individual company
deductible for 2006 and 2007
to 17.5 percent and 20 percent,
respectively.
3. Increase the industry aggregate
retention level from $15 billion to
$25 billion in 2006 and to $27.5
billion in 2007.
4. Reduction in the federal share of
compensation for covered losses
from 90 percent to 85 percent for
2007.
5. Maintains the $5 million threshold
for certification of a terrorist act,
while establishing a per event trigger
for federal participation in aggregate
insured losses of $50 million for
losses occurring after March 31,
2006, and before Jan. 1, 2007, and
$100 million for losses occurring in
the 2007 program ending year.
6. Extension of existing litigation
management provisions and
codification of regulations requiring
submission and approval of
proposed settlements.
“Basically, according to the federal
Department of the Treasury,
insurers have until Jan. 31, 2006, to
offer terrorism insurance to those
policyholders whose coverage was
scheduled to lapse in connection with
TRIA’s expiration on Dec. 31, 2005,”
explains Fred Fuller, DOI’s deputy
commissioner for the Property and
Casualty Division. “But, insurers will
not be required to make new offers
of terrorism to policyholders who
previously declined coverage that would
have been in effect in 2006.”
The National Association of Insurance
Commissioner’s (NAIC) adopted a
model bulletin on Dec. 28, 2005,
that is intended to aid state insurance
regulators in advising insurers about
regulatory requirements related to the
Extension Act. Further, the bulletin
provides guidance to insurers related to
rate filings and policy form language that
state regulators would find acceptable to
protect businesses from acts of terrorism.
“Currently, the Department is working
to adopt a version of the NAIC model
bulletin that advises insurers of these
Extension Act changes and provides
them with guidance about whether rate
and policy form filings might be needed
in North Carolina,” Fuller stated.
Terrorism Risk Insurance Extension Act of 2005
New Companies in
2005
Allstate Property and Casualty
Insurance Company, 12-31-05
American Equity Investment Life
Insurance Company, 04-15-05
Atlantic Coast Life Insurance
Company, 09-30-05
COUNTRY Life Insurance
Company, 05-13-05
Coastal Casualty Insurance
Company, 12-31-05
EastGUARD Insurance Company,
04-15-05
Fidelis SecureCare of North
Carolina, Inc., 07-15-05
General Fidelity Insurance
Company, 04-15-05
Housing Authority Property
Insurance, A Mutual Company,
06-15-05
MGIC Indemnity Corporation,
03-21-05
Nationwide Insurance Company
of America, 08-12-05
Progressive Halcyon Insurance
Company, 12-31-05
Starmount Life Insurance
Company, 11-10-05
United Concordia Life and Health
Insurance Company, 02-15-05
VantisLife Insurance Company,
04-15-05
Western General Insurance
Company, 04-15-05
New Phone Number for Agent Services
The phone number for the Agent Services Division has changed!
Please update your records and make note of it.
(919) 807-6800
When you call the Division after May 22, 2006, you will hear
an automated attendant feature which will give you prompts
to direct your call. The Division has a staff of specialists who will assist
licensees with licensure and compliance questions.


Spring 2006
The Agent Services Division has seen
a recent upswing in the number
of inquiries from agency manag-ers
wishing to employ convicted felons
— and the trend causes some concern.
These managers wish to hire convicted
felons not to handle insurance work that
requires a license, but rather for general
office duties. While such a job descrip-tion
fits within the exception of who
needs to hold a license, the Department
urges caution — in today’s increasingly
downsized and computerized agency,
there are fewer activities that fit within
the licensure exception.
If you, as an agency manager, intend to
hire a new receptionist, ask yourself: will
this person only answer the phone and
greet visitors? Or will there be occasion
for this person to give insurance quotes
to clients or prospective clients?
All agency managers and employees
should be aware of the provisions of the
federal Violent Crime Control and Law
Enforcement Act of 1994 (the Act),
18 U.S.C. §§ 1033 and 1034. The Act
prohibits a person who has been con-victed
of certain crimes from engaging
in the business of insurance unless that
person obtains written consent from the
appropriate chief state insurance regula-tory
official — for North Carolina, that
would be Insurance Commissioner Jim
Long. This broad definition makes the
Act applicable to anyone working for an
insurance agency, regardless of whether
or not that person is acting as an agent.
The Act provides for federal penalties,
both for the convicted person and any
employer of that person in the business
of insurance if the commissioner’s con-sent
is not obtained.
The Act realizes that those who made
poor choices in the past could poten-tially
demonstrate that they deserve a
second chance. Individuals who merit a
second chance can be employed in the
business of insurance; however, they
must first receive the required consent.
There are no exceptions, and individu-als
must obtain the consent before being
employed in an agency. As an employer
in the business of insurance, your duty
is to identify these individuals and guide
them in the right, and lawful, direction.
Felonies Explained
The felonies that fall under the Act
include those involving dishonesty or
breach of trust. Examples include, but
are not limited to, embezzlement, theft,
misappropriation and fraud. It is impor-tant
that employers screen employees for
all felonies, because ignorance to prior
felony convictions involving dishonesty
or breach of trust is not an excuse for
failing to comply with the Act; further,
ignorance does not exempt employers
from receiving penalties.
Business of Insurance
The Act defines the business of
insurance as:
a) the writing of insurance, or
b) the reinsuring of risks,
by an insurer, including all acts necessary
or incidental to such writing or reinsur-ing
and the activities of persons who act
as, or are, officers, directors, agents, or
employees of insurers or who are other
persons authorized to act on behalf of
such persons;
It is also important to note that DOI has
taken the position that anyone working
in any capacity in an insurance agency
must obtain the required consent.
Written Consent
All requests for written consent are pro-cessed
by DOI’s Agent Services Division.
The application for the commissioner’s
consent appears on the Department’s
Web site, www.ncdoi.com/Industry/
Agent/Licensing/Forms/FedCrime.PDF.
The written consent application and
required documents should be sent to
DOI’s Agent Services Division; because
the application requires court documen-tation,
it is recommended that all forms
be sent via overnight delivery to: NC-DOI,
Agent Services Division, 430 N.
Salisbury Street, Raleigh, NC 27603.
The Agent Services Division can process
a request for the Commissioner’s consent
in approximately two week’s time, de-pending
upon existing workload. Please
note that a person may not work in an
agency while awaiting the Commission-er’s
consent, and doing so exposes both
the employer and employee to the fol-lowing
penalties:
• Any person who has been convicted
of a felony involving dishonesty or
breach of trust and willfully engages
in the business of insurance without
the commissioner’s consent will be
fined, or imprisoned for not more
than five years, or both.
• Any individual engaged in the busi-ness
of insurance who willfully per-mits
the participation in the agency
of such a person will be fined, or
imprisoned for not more than five
years, or both.
Due Diligence
Here are suggested guidelines to ensure
that you exercise due diligence to protect
you and your agency from violating the
Act:
1. Have a felony criminal conviction
question as part of your employment
application.
2. If the person has a felony conviction,
complete the application for the
commissioner’s consent and submit
the application to the Agent Services
Division for review and approval.
Occasionally, DOI receives application
for consent for a felony that is not cov-ered
by the Act; in this case, the person
will receive a letter stating that the felony
does not require the commissioner’s con-sent.
If you have a question about the
criminal past of a current or potential
employee, call Elizabeth Guido or Rob-ert
Cunningham in the Agent Services
Division at (919) 807-6800.
Felony Convictions: How They Affect Your Agency
10
Eye on DOI
Insurance Agents
Christopher S. Russell, License Denial Upheld by
Administrative Hearing, 1/14/05, Property/Liability,
Concord
Ana C. Colon, Voluntary Surrender, 1/19/05
Property/Liability, William Laurie Nationwide
Agency, Charlotte
Angela H. Vestal, $500 administrative fine,
1/28/05, Life/Health; Property/Liability; Med Supp/
LTC; Motor Club; Broker, Advantage Insurance
Services, Asheboro
Gary Bryant, $250 administrative fine, 2/18/05,
Life/Health; Property/Liability, Gastonia
Melanie D. Frye, Voluntary Surrender, 2/24/05,
Property/Liability; Broker, Summit Insurance
Agency, Asheboro
Teresa D. Brank, Voluntary Surrender, 3/1/05,
Property/Liability, Brank Insurance, Weaverville
Larry M. Drake, Voluntary Surrender, 3/2/05, Life/
Health; Property/Liability; Med Supp/LTC; Broker,
Denver Insurance Agency, Lumberton
Rebecca F. Bright, $500 administrative fine,
3/16/05, Life/Health; Property/Liability; Med Supp/
LTC; Broker, formerly of NC Farm Bureau Mutual
Insurance Co., Kinston
Dyrell M. Oates, $500 administrative fine, 3/22/05,
Life/Health; Property/Liability; Motor Club, Mt.
Olive
Louann M. Gimber, Voluntary Surrender,
4/1/05, Life/Health, Property/Liability, formerly of
Summerlin Insurance and Realty, Inc., Jacksonville
Robert A. Roberts, Voluntary Surrender, 4/1/05,
Life/Health; Property/Liability; Med Supp/LTC;
Broker, formerly of Roberts Insurance Agency,
Wilmington
Karl Rabe, License Denial Upheld by
Administrative Hearing, 4/7/05, Life/Health,
Carrboro
Thomas C. Bradley, License Revoked, 4/8/05,
Life/Health; Med Supp/LTC, formerly of Bradley
and Associates, Pinehurst
Wesley K. Miller, Voluntary Surrender, 4/18/05,
Life/Health; Property/Liability, formerly of First
Choice Mobile Homes, Kinston
Troy G. Clark, Voluntary Surrender, 4/19/05,
Life/Health, Lexington
Michael C. Carbajal, License Suspended for six
months, 4/21/05, Life/Health; Property/Liability;
Med Supp/LTC; Motor Club, Veracruz Insurance
Agency, Charlotte
Emily R. Villegas, Voluntary Surrender, 5/18/05,
Property/Liability, formerly of Olympia Latin
Services, Charlotte
Brenda B. McClellan, $2,000 administrative fine,
6/3/05, Life/Health; Property/Liability; Broker,
McClellan Insurance Agency, Inc., Spruce Pine
Ashley J. “AJ” Baugstat, $250 administrative fine,
6/10/05, Life/Health; Med Supp/LTC, Harrisburg
Ivon Medina, $1,000 administrative fine, 6/10/05,
Life/Health; Property/Liability, formerly of Allstate,
Charlotte
Joseph S. Brown, IV, $500 administrative fine,
6/10/05, Life/Health; Property/Liability, formerly of
United Healthcare, Greensboro
Jordan H. Wilkins, License Revoked, 6/27/05,
Life/Health; Property/Liability, Louisburg
Joseph S. Brown, IV, License Surrender, 7/14/05,
Life/Health, Greensboro
Patrick J. Cusack, $100 administrative fine,
8/23/05, Life/Health; Property/Liability; Med Supp/
LTC; Broker, Asheville
Duncan H. Dawkins, Voluntary Surrender,
7/28/05, Life/Health, formerly of Mountain Eagle
Insurance Agency, Hendersonville
Lisa D. Yates, Voluntary Surrender 7/28/05,
Life/Health; Property/Liability, formerly of
Mountain Eagle Insurance Agency, Hendersonville
William R. Goldstein, Voluntary Surrender,
8/24/05, Life/Health; Property/Liability, Charlotte
Ann Y. Williams, Voluntary Surrender, 9/14/05,
Credit Life; Credit Unemployment, Bunn Level
Amanda J. Boyd, Voluntary Surrender, 10/3/05,
Property/Liability, formerly of Winterville Insurance
Agency, Greenville
Willard D. McNair Jr., $1,350 administrative fine,
10/6/05, Life/Health; Property/Liability; Broker,
Laurinburg
Arthur Mitchell, Jr., $1500 administrative fine,
10/6/05, Life/Health; Property/Liability, Allstate
Mitchell Agency, Elizabeth City
Terry W. Johnson, Voluntary Surrender, 10/19/05,
Life/Health; Med Supp/LTC, Willow Springs
Annie M. Green, Voluntary Surrender, 10/24/05,
Property/Liability, formerly of Gateway Insurance
Service, Elizabeth City
Joseph F. Lineberger, Voluntary Surrender, 11/10/
05, Life/Health; Property/Liability; Broker, formerly
of AB Insurance Agency, Charlotte
John F. McLure, Voluntary Surrender, 11/10/05,
Life/Health; Property/Liability; Med Supp/LTC;
Broker, formerly of McLure Insurance Agency,
Pinehurst
Angela R. Queen, Voluntary Surrender, 11/10/05,
Property/Liability, formerly of AllCare Insurance
Agency, Charlotte
Margaret C. Humphrey, Voluntary Surrender,
12/6/05, Life/Health; Property/Liability; Med,
formerly of the Nationwide-Brent King Agency
Supp/LTC, Kinston
Larry T. Russ, Voluntary Surrender, 12/6/05,
Property/Liability, formerly of S&D Insurance
Agency, Concord
James R. Dupree, Voluntary Surrender, 12/9/05,
Life/Health; Property/Liability; Broker, formerly of
Dupree Ins. Services LLC, Raleigh
Spyros Kroustalis, Voluntary Surrender,
12/29/05, Life/Health, formerly of United
Healthcare, Clemmons
Winsome Purrier-Epting, $500 administrative fine,
1/9/06, Life/Health; Property/Liability,, formerly of
Allstate, Fayetteville
Bail Bondsmen
Eagle A. Collins, $500 administrative fine, 3/11/05
Surety Bail Bondsman, Manteo
Ronald K. Baker, $500 administrative fine, 3/16/
05, Surety Bail Bondsman, Goldsboro
Ondra D. Richardson, License Revoked, 4/20/05,
Surety Bail Bondsman, Charlotte
Andrea L. Grizzle, $500 administrative fine,
5/3/05, Surety and Professional Bail Bondsman,
Moyock
Andrew E. Harris, III, $750 administrative fine,
7/18/05, Surety Bail Bondsman, Durham
Bobby L. Jenkins, $500 administrative fine, 8/1/05,
Surety and Professional Bail Bondsman, Wilson
Shawn T. Williams, $500 administrative fine,
6/13/05, Surety Bail Bondsman, Wilmington
Calandra W. Gray, $250 administrative fine,
8/10/05, Surety Bail Bondsman, Charlotte
Leroy C. Richardson, $750 administrative fine,
8/10/05, Surety Bail Bondsman, Winston-Salem
Crystal B. Wright, $250 administrative fine,
8/22/05, Surety Bail Bondsman, Gastonia
Derrick D. Harrington, $1,000 administrative fine,
9/1/05, Surety Bail Bondsman, Raleigh
Elliot C. Hunter, $750 administrative fine,
10/24/05, Surety Bail Bondsman, Charlotte
George Lilly, Jr., $250 administrative fine, 12/9/05,
Surety and Professional Bail Bondsman, Fayetteville
Carlester J. Massey, $500 administrative fine,
12/19/05, Professional Bail Bondsman, Charlotte
Insurance Companies
Harco National Ins. Co, $1,000 administrative
fine, 5/5/05, Surety Company, Raleigh
Collection Agencies
Syndicated Office Systems, $1000 administrative
fine, 1/18/05, Anaheim, CA
Commercial Recovery Systems, $5000
administrative fine, 3/29/05, Dallas, TX
Collectors Training Institute, $500 administrative
fine, 4/21/05, Chicago, IL
National Credit Systems Inc., $1,000
administrative fine, 7/7/05, New York, NY
Premium Finance Companies
Columbus Insurance Finance Company, $1000
administrative fine, 7/18/05 Whiteville
The Hallmart Agency, Inc., $1000 administrative
fine, 7/27/05, Wilson
Market Examinations Division
Provident Life and Accident Insurance Company,
settled on 3/11/05 for $70,250.00.
Massachusetts Mutual Life Insurance Company,
settled on 5/4/05 for $97,700.00.
WellPath Select, Inc, settled on 5/5/05 for $9,200.
BlueCross BlueShield of North Carolina, settled
on 6/10/05 for $6,600.
American General Life & Accident, settled on
6/27/05 for $124,150.00.
Waddell & Reed Companies (Multi-State), settled
on 8/17/05 for $12,761.65.
New York Life Insurance Co., settled on 9/1/05 for
$31,400.
Republic Western (Bid Rigging), settled on 9/9/05
for $20,000.
Celtic Insurance Company, settled on 10/18/05 for
$37,900.
BlueCross BlueShield of NC, settled on 12/8/05
for $15,700.
Regulatory Actions for 2005
11
Spring 2006
Just last year, the Market
Examinations Division got bigger.
This Division, which is responsible
for conducting examinations of life
and health, property and casualty and
premium finance companies, absorbed
what was previously the Managed Care
and Health Benefits Division. Now
the Division also reviews annual filings
submitted by health maintenance
organizations (HMO) and preferred
provider organizations (PPO). The
Division’s main purpose is to determine
whether companies are in compliance
with relevant statutes and administrative
codes pertaining to the business of
insurance in North Carolina.
Historically, examinations were
scheduled based on the insurer’s market
share, number of consumer complaints
on file, date of last examination and
premium volume written in the state
of North Carolina; however, this
approach has been discontinued in
favor of a market analysis approach.
This new approach involves gathering
and analyzing data on specific insurers,
and permits a more in-depth review
of filed complaints to identify areas of
concern that may result in compliance
problems that may warrant some form
of regulatory resolution.
“Our market analysis unit was
implemented in March 2005 and
currently consists of four market analysts
and a market analysis manager,” explains
Ernest Nickerson, deputy commissioner
for the Market Examinations Division.
“In the last five years, the Department’s
market conduct exams have yielded in
excess of $28 million to North Carolina’s
consumers because of the insurers’
noncompliance with relevant insurance
laws.” (see Figure 1 for details)
The Division is currently comprised
of three life and health examination
teams and two property and casualty
examination teams which have
completed an average of 48 examinations
per year during the past five years (see
Figure 2). Examination results reveal
that the majority of the monies returned
to affected policyholders stem from the
insurers failure to process life and health
claims accurately and/or timely, failure
to apply the correct or approved rates
for property and casualty policies, and
failure to refund the correct amount of
monies resulting from private passenger
automobile rate settlements.
Market Examinations — How DOI Helps Companies and Consumers
Market conduct examinations
are conducted on domestic
HMOs at least every three
years as required by N.C.G.S.
58-67-100. Examinations of
domestic life and health (other
than HMOs) and property and
casualty insurers are scheduled
at least every five years; however,
unlike domestic market exams,
examinations of foreign insurers
are not required to be performed
on a routine basis. Pursuant to
N.C.G.S. 58-3-91, HMO and
PPO annual filings are reviewed
annually.
Figure 1: Five Year Historical Summary of Monies
Returned to N.C. Consumers and Producers
$0 $4,000,000 $8,000,000 $12,000,000 $16,000,000 $20,000,000
2001
2002
2003
2004
2005
Figure 2: Five Year Historical Summary
of Completed Examinations
4 7
4 9
4 2
5 0
5 3
0 1 0 2 0 3 0 4 0 5 0
2001
2002
2003
2004
2005
Since its creation in 1973, the DOI’s
Consumer Services Division has
continued to work towards its goal
of providing assistance to insurance
consumers, as well as providing accurate
and relevant information to educate
North Carolina’s consumers.
The Consumer Services Division stays
busy helping consumers who bring
their insurance questions and concerns
to us by phone, email, in writing or in
person. “During 2005, the Division
handled over 143,000 telephone calls,
which made up the majority of the con-tacts
Consumer had with the public,”
explained Bob Lisson, the deputy com-missioner
for Consumer Services. “A lot
of times, we can answer general insur-ance
questions through one of the De-partment’s
many consumer guides; last
year we distributed more than 25,000
hard copy guides, and many more were
downloaded from the Department’s Web
page, www.ncdoi.com.”
Lisson also reports that Consumer
Services processed nearly 11,000 written
complaints in 2005. “When we need to
contact an insurance company on behalf
of a consumer, we ask that a written
complaint be filed with our Division,”
he stated. While the specialists were not
able to satisfy every consumer complaint,
many insurance problems were resolved
after the DOI became involved. In fact,
Departmental involvement benefited
North Carolinians to the tune of
approximately $14,780,000. Consumers
were assisted with issues such as payment
of claims, return of premium and
reinstated coverage.
“Consumers in North Carolina can
always find someone willing to assist
them at the Department of Insurance,”
said Lisson. “Anyone with insurance-related
problems or questions can reach
the Consumer Services Division by
calling 1-800-546-5664 or visit us
online at www.ncdoi.com.” The
Consumer Services Division may
also be reached by mail at
1201 Mail Service Center,
Raleigh, NC 27699-1201.
Consumer Services Continues Tradition of Helping,
Educating North Carolina’s Citizens
The following amounts represent
the approximate dollar amounts
recovered by North Carolina
consumers, in conjunction with
complaints submitted to the
Department of Insurance (for
complaints closed during calendar
year 2005). These amounts are
rounded up and are broken down by
line of business.
Automobile $1,632,456
Homeowners $621,915
Liability $62,189
Fire, Allied and CMP $95,681
Miscellaneous Lines $908,842
Life and Annuity $6,322,740
Accident and Health $1,677,744
Health Complaints from Providers
and Facilities
$3,461,884
Total $14,783,452
Presorted Standard
U.S. Postage
PAID
Permit #1
Raleigh, NC
North Carolina Department of Insurance
1201 Mail Service Center
Raleigh, NC 27699-1201
www.ncdoi.com
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